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2016 Outlook: Headwinds or Tailwinds? Financial Planning Association of Colorado Richard Wobbekind Executive Director Business Research Division Leeds School of Business January 22, 2016
Real GDP Growth Quarterly Real GDP Percent Change, SAAR 10.0 8.0 6.0 4.0 2.0 0.0-2.0-4.0-6.0-8.0-10.0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Sources: Bureau of Economic Analysis and Consensus Forecasts.
National Employment Recession 8 Months Thousands, Month-over- Month 500 300 100-100 -300-500 -700-900 2000 2002 2004 2006 2008 2010 2012 2014 2016 Recession 18 Months Sources: Bureau of Labor Statistics (Seasonally Adjusted), National Bureau of Economic Research, and the Business Research Division.
State Employment Growth Pre-Recession Peak to November 2015 Sources: Bureau of Labor Statistics (Seasonally Adjusted).
National Unemployment Percentage of Labor Force 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 1994 1997 2000 2003 2006 2009 2012 2015 U-3 U-2 U-1 Source: Bureau of Labor Statistics (Seasonally Adjusted).
Labor Underutilization Percentage of Labor Force 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 1994 1997 2000 2003 2006 2009 2012 2015 U-6 U-5 U-4 U-3 U-2 U-1 Source: Bureau of Labor Statistics (Seasonally Adjusted).
Labor Slack Number of Available People Per Job Opening People per job opening 10 Ratio of people not in the labor force who want a job now and the total number of unemployed, divided by total number of job openings 9 8 7 6 5 4 Pre-recession average 3 2 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Sources: BLS JOLTS, Labor Force, and Unemployment; Deutsche Bank Research.
Labor Force and Unemployment Rate National, by Age Cohort, November 2015 90% 80% 70% Labor Force Participation Rate 80.7% 82.2% 79.7% 70.5% 64.3% 12% 10% 9.6% Unemployment Rate 60% 8% 50% 40% 6% 5.5% 30% 4% 3.9% 3.3% 3.6% 20% 10% 2% 0% 20-24 25-34 35-44 45-54 55-64 0% 20-24 25-34 35-44 45-54 55-64 Sources: Bureau of Labor Statistics, all data seasonally adjusted except for ages 55-64.
U.S. Income and Consumption Percent Change 5.0 Real Disposable Income Percent Change 4.0 Real Personal Consumption 4.0 3.0 2.9% 3.0 2.9% 2.0 2.0 1.0 1.0 0.0 0.0-1.0-1.0-2.0-2.0-3.0 2006 2008 2010 2012 2014 2016-3.0 2006 2008 2010 2012 2014 2016 Sources: Consensus Forecasts.
Household Wealth Q2 2000-Q2 2015 $ Trillions 100 80 Other Assets 60 40 20 0-20 Q1 2000 Q1 2003 Q1 2006 Q1 2009 Q1 2012 Q1 2015 Mutual Funds Corporate Equities Real Estate Total Liabilities Source: Federal Reserve Board, Balance Sheet of Households and Nonprofit Organizations (B100) (Not Seasonally Adjusted).
Household Debt Burden Percent of Disposable Income DSR 15.0 14.0 13.0 12.0 11.0 10.0 9.0 FOR 20.0 19.0 18.0 17.0 16.0 15.0 14.0 8.0 13.0 1980Q3 1984Q1 1987Q3 1991Q1 1994Q3 1998Q1 2001Q3 2005Q1 2008Q3 2012Q1 2015Q3 Source: Federal Reserve, Household Debt Service and Obligations Ratios.
Index of Consumer Confidence 1985=100 160 Recession 8 months Recession 18 months 140 Mountain Region 120 100 80 60 United States 40 20 0 1990 1992 1995 1997 2000 2002 2005 2007 2010 2012 2015 Sources: The Conference Board and National Bureau of Economic Research.
Vehicle Sales and Retail Sales Thousands, SAAR 25,000 Vehicle Sales Retail and Food Services Sales YOY, Percentage Change 15.0 20,000 10.0 15,000 10,000 5,000 5.0 0.0-5.0-10.0 0 2005 2007 2009 2011 2013 2015-15.0 2005 2007 2009 2011 2013 2015 Sources: Seasonally Adjusted Annual Rate, Autodata Corp., Motor Intelligence, U.S. Census Bureau.
Nominal Corporate Profits and U.S. Business Fixed Investment Percent Change Nominal Pre-Tax Corporate Profits Percent Change Business Fixed Investment 30.0 10.0 25.0 20.0 5.0 4.3% 15.0 10.0 5.0 3.3% 0.0-5.0 0.0-5.0-10.0-10.0-15.0-15.0-20.0 2006 2008 2010 2012 2014 2016-20.0 2006 2008 2010 2012 2014 2016 Sources: Bureau of Economic Analysis, Consensus Forecasts.
ISM Indices 70 65 60 55 50 45 40 35 ISM Manufacturing Index 70 65 60 55 50 45 40 35 ISM Non-Manufacturing Index 30 2003 2005 2007 2009 2011 2013 2015 30 2003 2005 2007 2009 2011 2013 2015 Source: Institute for Supply Management (ISM).
National FHFA Home Price Growth Year over Year Q3 2015 Source: Federal Housing Finance Agency Home Price Index, All Transactions Index.
Housing Affordability Index Composite 220 180 140 100 60 Jan-85 Jan-88 Jan-91 Jan-94 Jan-97 Jan-00 Jan-03 Jan-06 Jan-09 Jan-12 Jan-15 Source: National Association of Realtors.
National Housing Starts Millions 2.5 2.0 1.5 1.3 1.0 0.5 0.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Sources: U.S. Census Bureau and Consensus Forecasts.
Federal Budget Balance $ Billions 400 200 0-200 -400-600 -$474-800 -1,000-1,200-1,400-1,600 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Sources: Bureau of Economic Analysis, NIPA Table 3.18B, Consensus Forecasts.
U.S. Nominal Broad Dollar Index and Real Net Exports U.S. Nominal Broad Dollar Index 1973=100 135 130 125 120 115 110 $ Billions 0.0-100.0-200.0-300.0-400.0-500.0 Real Net Exports 105 100 95 90 2005 2007 2009 2011 2013 2015-600.0-700.0-800.0-900.0 2005 2007 2009 2011 2013 2015 -$585 Sources: Federal Reserve, Bureau of Economic Analysis.
Money, Interest Rates, and Prices
Interest Rates Percent 7.0 6.0 10-Year Treasury Interest Rates, 2000-2017 (Forecast) 5.0 4.0 3.0 2.0 1.0 3-Month Treasury 0.0 2000 2002 2004 2006 2008 2010 2012 2014 2016
The FED Balance Sheet, 2007-2015 QE 1, QE 2, QE 3 Fed promises near zero interest rates until mid-2013, 2014, 2015, 2016 Operation Twist Swaps Tapering Tapering Complete $ Millions 5,000,000 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 Other Assets Mortgage Backed Securities Federal Agency Debt Securities Treasury Securities Federal Funds Rate Increase? 500,000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Federal Reserve Balance Sheet.
National Inflation Percent 0.06 0.05 0.04 0.03 0.02 0.01 0-0.01 All Items All Items Less Food and Energy -0.02 Shelter -0.03 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
International and National Summary Global output and trade growth Value of the dollar strengthening GDP growth nearing potential Balance sheets getting stronger Rising (but low) interest rates Subdued inflation
Colorado Population, Employment, and Prices
Change in Population Change in Colorado Population Thousands 2004-2040 120 100 80 60 40 20 0 2004 2009 2014 2019 2024 2029 2034 2039 Net Migration Natural Increase 4th-fastest state for percentage growth 8th-fastest state for absolute growth 22nd-most populated state in nation Continued net migration into the state 83% of population along Front Range Source: Colorado Demography Office.
Colorado Employment and Education, 2015 Employment by Occupation Management 4% Bus. and financial operations 7% Computer and math 4% Architecture and engineering 2% Science 1% Education training 6% Arts and entertainment 2% Healthcare 5% Educational Attainment Adults over age 25 with a bachelor s degree or higher U.S. 29.1% Colorado 37.5% Adults over age 25 with a high school diploma U.S. 86.4% Colorado 90.6% Other 68% Sources: Bureau of Labor Statistics, Quarterly Census of Employment and Wages.
Colorado Employment Growth Jobs Added, 1991-2016 Thousands 100 65,100 50 0-50 -100 Best years since 2000-150 1991 1996 2001 2006 2011 2016 Sources: Bureau of Economic Analysis, NIPA Table 3.18B, Consensus Forecasts.
Employment Change 2015-2016 Professional and Business Services Education and Health Services Trade, Transportation, and Utilities Construction Leisure and Hospitality Government Financial Activities Manufacturing Other Services Information Natural Resources and Mining -4.0 0.0 4.0 8.0 12.0 16.0 Thousands of Jobs Source: Boulder Economic Outlook Forum (BEOF).
Employment Recovery National, State, and Local Percent 30.0% 25.0% Greeley 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% Ft. Collins- Loveland Colorado Boulder Pueblo National Colorado Springs Grand Junction Denver 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 Number of Months Since Peak Source: Bureau of Labor Statistics (Seasonally Adjusted).
Regional Employment Growth and Unemployment Employment Growth Rate, November YoY Fort Collins Greeley Denver-Aurora- Lakewood Boulder Pueblo Colorado Springs Grand Junction Colorado 1.8% Fort Collins Greeley Denver-Aurora- Lakewood Boulder Pueblo Colorado Springs Grand Junction Unemployment Rate November 2015 Colorado 3.5% NSA, 3.6% SA 0 1 2 3 4 5 Percentage Sources: CES (Seasonally Adjusted) and LAUS (Not Seasonally Adjusted). 0 2 4 6 Percentage
Personal Income Growth 2015
Location Quotient Colorado 3.0 LQ 2.5 Information 2.0 PBS 1.5 L&H 1.0 Manufacturing Financial activites Other TTU EHS 0.5-2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% Sources: Bureau of Labor Statistics, QCEW. 3 Year CAGR
Consumer Price Index All Items Percent CPI Percent Change, 2002-2012 4.0 United States Denver-Boulder-Greeley 3.0 2.0 1.0 1.0% 0.0-1.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015-0.1% Sources: Bureau of Labor Statistics. 2015 available through June.
Natural Resources and Mining
Colorado Gasoline Prices 2005-2015 Dollars per Gallon $4.50 $4.00 $3.50 July 7, 2008: US $4.17 CO $4.03 December 23, 2014: US $3.35 CO $3.09 $3.00 $2.50 Average 2004-2014 $2.00 $1.50 $1.00 December 21, 2015: US $2.13 CO $1.97 $0.50 $0.00 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Weekly Colorado All Grades All Formulations Retail Gasoline Prices (Dollars per Gallon).
Crude Oil Production 2006-2016 Largest Producers 1. Texas 2. North Dakota 3. California 4. New Mexico 5. Alaska 6. Colorado 7. Oklahoma 8. Wyoming 9. Louisiana 10. Kansas Production boosted by Millions of Barrels 120 100 80 60 40 107.5 Horizontal drilling Hydraulic fracturing 20 0 2006 2008 2010 2012 2014 2016 Sources: Rankings from the Energy Information Administration. Production data from Colorado Geological Survey Mineral and Mineral Fuel Activity Reports, Colorado Oil and Gas Conservation Commission, Department of Minerals and Geology, and Colorado Business Economic Outlook Committee.
Construction Value of Construction Nonbuilding 14% Nonresidential 30% Residential 55% Photo Courtesy www.rtd-fastracks.com
Housing Units vs. Households Annual Change 70,000 60,000 50,000 Households Housing Units 40,000 30,000 20,000 10,000 0 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Colorado Foreclosures 2004-2015 80,000 70,000 60,000 Total State Foreclosures Over Time Sales 50,000 40,000 30,000 20,000 10,000 0 Filings 2003 2005 2007 2009 2011 2013 2015 YTD Source: Colorado Division of Housing. 2015 data available through September.
Federal Housing Finance Agency (FHFA) House Price Index by MSA Q3 2014 Q3 2015 Colorado 12.7% Denver-Aurora-Lakewood Boulder Fort Collins Greeley Pueblo Colorado Springs Grand Junction 0.0 3.0 6.0 9.0 12.0 15.0 Percent CAGR Q3 2005 Q3 2015 Colorado 2.5% Denver-Aurora-Lakewood Boulder Fort Collins Greeley Pueblo Colorado Springs Grand Junction 0.0 1.0 2.0 3.0 4.0 Percent Source: Federal Housing Finance Agency, All Transactions Indexes.
Residential Building Permits 2006-2016 45,000 40,000 35,000 30,000 25,000 Multifamily 36,750 Residential Housing: Home appreciation among the fastest nationally Mostly single family permits in 2016 20,000 15,000 Lowest foreclosure rate in two decades 10,000 5,000 0 Single Family 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Sources: U.S. Census Bureau and Colorado Business Economic Outlook Committee.
Value of Construction 2006-2016 $ Millions 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 Nonbuilding Nonresidential Residential $16.8 B 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Sources: McGraw-Hill Construction Dodge Research and Analytics and Colorado Business Economic Outlook Committee.
Retail Trade Sales Colorado Taxable Retail Sales 12-Month Rolling Sum 12-Month Rolling Sum, $ Millions 95 90 Percent Change 10.0 Colorado Retail Trade Sales 2006-2016 Nominal Growth 5.6 85 5.0 80 75 70 65 60 70 Months 0.0-5.0-10.0 Real Growth 55 50 2001 2003 2005 2007 2009 2011 2013 2015-15.0 2006 2008 2010 2012 2014 2016 Sources: Colorado Department of Revenue and Colorado Business Economic Outlook Committee.
Colorado General Fund Gross Revenue (excluding reserves, diversions, and transfers) $ Millions 12,000 11,400 10,800 10,200 9,600 9,000 8,400 7,800 7,200 6,600 6,000 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Source: Colorado Office of State Planning and Budgeting, excluding reserves, diversions, and transfers, December 2014.
Employment and New Entity Filings Employment, thousands 2,550 12-month total new entity filings 110,000 2,500 2,450 2,400 2,350 2,300 2,250 2,200 2,150 Employment New Entity Filings 105,000 100,000 95,000 90,000 85,000 80,000 75,000 70,000 65,000 2,100 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Note: Solid line displays actual seasonally adjusted employment numbers; dotted line reflects calculated forecasts. Source: Seasonally adjusted. Colorado total nonfarm employees from the Bureau of Labor Statistics, Current Employment Statistics (CES), calculations by BRD research team. 60,000
U.S. and Colorado Economies Q1 2004 Q1 2016 Index (50=Neutral) 75 National and State Expectations 70 65 60 55 50 Colorado 45 40 35 United States 30 25 Q1 2004 Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016
Colorado Economic Indicators Year Consumer Price Inflation Percent Change Retail Sales Colorado Economic Indicators Percent Change Personal Income Unemployment Rate Percent Change Employment 2013 a 2.77 4.76 2.88 6.53 2.99 2014 a 2.78 6.62 6.04 4.94 3.32 2015 0.22 5.38 5.07 4.08 2.94 2016 1.20 5.44 5.81 3.35 2.17 2017 2.29 7.00 6.92 3.71 2.55 2018 2.48 6.38 6.68 3.88 2.48 2019 2.55 4.50 5.08 3.95 1.85 2020 2.42 3.46 3.98 4.15 1.12 2021 2.38 3.42 3.86 4.37 1.16 a Historical data. Note: Represents annual averages of the month-to-month growth rate.
State Summary Colorado outperforms nation in employment growth Falling unemployment Full employment??? Labor force pressures Growing population Strong in-migration
Concerns Fed funds target rate Cost of housing Availability of labor Price of oil El Niño Median family income
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